You might also stop buying real estate if the government seems unstable and economy is poised to collapse. Good soybeans also depend on fuel prices and the continued flow of fertilizer...
Same for Russia.
The main problem right now is that the US are not the US for which we voted with our feet. They are a worse alternative to the US that created the status quo (to their advantage obviously, but much of the world also benefitted from free trade and the lack of other world wars).
"China, the world’s largest coal consumer, has domestic reserves of coal to last the next 50 years, according to annual reserves data from the Ministry of Natural Resources cited by Bloomberg.
At current rates of domestic production, China also has crude oil reserves that could last for at least 18 more years, according to the ministry"
https://oilprice.com/Latest-Energy-News/World-News/China-Say...
https://www.mining.com/web/china-has-enough-coal-reserves-to...
I have a habit of thinking about history in very long terms, and that just does not sit right with me. That kind of thinking (oh we have enough for decades, let it rip!) happens, and the decades pass, and time inevitably is less kind to the descendants of such decision makers.
(incidentally the latest such shock was sometime this decade when I learnt that an aquifer could not only be depleted, but that that depletion would compact the soil so that it would thereafter be unable to hold water, and thus never (at least on our timescales) be able to be replenished. I think I'm still not over that!)
In historical terms, it took about 60 milion years to form this coal layers. Humanity will burn them in few centuries.
https://en.wikipedia.org/wiki/Carboniferous
From the point of view of energy. The conversion of solar energy into coal is very inefficient, tree need energy to reproduce, only a part of plant is converted into coal, other organisms consuming plant matter, etc.
https://watcher.guru/news/20-billion-oil-deals-paid-in-chine...
"China and Saudi Arabia Settle First Oil Trade Using Digital Yuan"
https://www.economywatch.com/china-and-saudi-arabia-settle-f...
RMB - maybe, but nobody sane trusts China to not immediately change priorities on a dime
EUR - imho (much) less chance than RMB, but they're using a hack: of EUR is a massive entity and internally there's no choice. Literally not allowed (due to tax reasons) (exceptions of course made for favored entities) (I feel that those favored entities exist, and how big they are, should be a huge red flag for anyone considering using EUR)
JPY - can't project force ... and doesn't even try
AUD - no
CAD - no
SGD - no
I don't understand why you're not listing GBP, as they have at least at some point done this. Of course they were a worse steward of international trade than the worst point of the US. Also, you consider AUD, but not CHF?
So what choice is there, really? This is really a way to try to push the US to do more, for less "exorbitant privilege" (especially EUR). Of course, a great many people are very interested in doing just that. It strikes me as an extremely dangerous game to play. Yes, the odds of winning are good, but if you lose, you lose everything.
Given the history of economic sanctions (what the EU is doing) ... of course people don't know that history, but the TLDR is that nearly always economic sanctions are a prelude to war. They don't just not work. In many cases they cause wars. WW1 was caused by economic sanctions (and the scale of EU economic sanctions is 100x bigger than what caused WW1), and often the economic sanctions on Germany after WW1 are generally thought to be the big reason for WW2. It makes sense from a game theory perspective: if a government, whose power is fundamentally based on force, lets economic sanctions convince them, they will be attacked by their own people. So they simply cannot give in, and historically that's what you indeed mostly see: when a country is targeted by economic sanctions, it's government usually decides to attack.
The EUR is imposing very large scale sanctions on ... essentially everyone. Russia and China most obviously of course, but sanctions are so widely used by the EU you can literally say it's being used against everyone from Afghanistan to Zimbabwe, or geographically from Paraguay to North Korea. And why is the EU doing this? Exactly the reason Trump is doing it: sanctions are "power without needing parliament to approve the budget for anything".
The fear is: the historically most likely outcome of what the EU is doing, what EUR is being used for, is another very large scale war.
Global reserves continue to hold USD in greater quantities than anything else. A movement away from the USD still means a relative loss of faith in the US. If there's nobody who can guarantee trade then you still need to hold reserves, right? You just have to hold a broad and shallow pool rather than going deep on one currency.
There are of course a zillion other borrowers worldwide but they're all much smaller and suffer from a variety of other structural problems. If you need to deploy a huge amount of capital with low risk and high liquidity then US treasuries are still the only realistic option.
What’s happening to US bonds has been compared to using a credit card to pay off your mortgage...
Because if you don't, you are abducted or killed or "regime changed" or sanctioned to famine-level poverty - all for "freedom & democracy". Kindly remember that the Corporate States of America has the world's most powerful military... well I suppose it is nowadays in the top #3.
The US prints two kinds of dollars, the regular kind, then the T-bills.
T-bills get exchanged like dollars, investors/governments buy them because they are thought to be as stable as dollars, but also bear a bit of yield. The US benefits by printing T-bills over dollars because merely by changing the current interest rate, they change the dollar supply. Increasing interest rates lower the value of T-bills, decreasing the supply of dollars (as Silicon Valkey Bank found out...). This allows the US currency to remain very stable.
Referring to the $40T of T-bills merely as "debt" is quite deceptive. It's the global currency. You need enough currency out there to represent the actual amount of wealth, otherwise the values of dollars increases, and deflation is the only thing worse than inflation.
The US' $2T budget deficit is basically the rest of the world paying the US for the privilege of using US currency. The US is printing money, and getting the benefits of spending, because the rest of the world needs dollars to transact. They send us goods, we send them printed dollars. And then we get a president who calls this situation bad, because he doesn't understand what a "trade deficit" is. Utter insanity to have such a position and then just throw it all away.
https://en.wikipedia.org/wiki/Triffin_dilemma
This 2020 piece by Lyn Alden is a great explainer:
https://www.lynalden.com/fraying-petrodollar-system/
(Not that I think anything Trump has done has helped the situation even accidentally.)
The middle class actually benefits the most from this situation! More goods, more government services, etc. How much more? Just add up all the trade deficits, that's all benefit accrued almost entirely to the middle class.
What I meant was "blue collar working class" as opposed to the neo-artistocrat professional class. The Triffin Dilemma is a contributor to the K shaped economy and rise of populism.
>And from there, the value of the system depends on who you ask. Folks who are often on the higher end of the income spectrum who worked in finance, government, healthcare, or technology benefitted from this system, since they obtained many of the benefits of globalization and none of the drawbacks. Folks who are often on the lower end of the income spectrum, specifically those that make physical things, are the ones that benefitted least and gave the most up, since their jobs were outsourced and automated at a faster rate than other developed countries. But now with China also undermining the structure of the system, even the geopolitical/hegemonic benefits for the political class are subverted as well.
The piece puts increasing trade deficits next to lots of stuff about increasing inequality, but it does not make the case that trade deficits are the cause of increasing inequality.
There's a person that had a job making physical things, but they are not inherently a "person that only makes physical things." The idea that bringing back the making of physical things will make these people wealthier is, well, suspicious. Unions? Better taxations systems? Modernizing manufacturing so that each worker is far more productive and we can compete with the world? That may help. But reducing trade deficits will not fix any of the K shaped economy.
How does this not correspond directly to reduced trade deficits? In this scenario the US is either sourcing more of what it needs internally, and thereby importing less, or it is more competitive globally and therefore exporting more, or both.
But manufacturing is not a way to decrease inequality unless there's massive massive other sorts of changes going with it.
In fact destroying the higher paying jobs to replace them with lower paying jobs in the US will heighten the inequality. And that's what's happening right now.
We can pay for imports with things we make or things we own. To a first approximation, making things employs people and owning things does not. If we pay with things we make, our economy employs people. If we pay with things we own, the jobs disappear while stocks/bonds/real estate soar.
If you want the whole story from an actual economist, read "Trade Wars are Class Wars" by Klein and Pettis.
The benefit is to the US in aggregate but is a detriment to most US citizens, since most US citizens get their money primarily from working rather than from owning assets. But for the minority of people who mostly get their money from owning assets, this is brilliant, I agree.
Sure, there was a serious conversation to be had about this at some point, but it was probably before stacking up tons of unsustainable debt that directly depends on that part of the shell game. And there are many things that can/should change, but in a certain way and at a certain time to avoid pain and chaos. Arguing "this was always bad for us, fuck it" is kind of a pattern now, right? When someone wants to change some things, great, everything sucks. But when someone wants to tear down every status quo, and especially the ones that they apparently benefited from while saying "everyone after me doesn't need it", then it's a pretty clear sign.
US is now a lot of crazy old people finding new ways to eat their children and trying to see the world burn before they check out. They created the bulk of the debt, benefited from it immensely, propped it up with collateral that was always kind of imaginary, continue to increase the debt. Not great, but now we are also proposing to just destroy what's left of that thin collateral? I don't know how to explain that with greed or stupidity even, it just seems like spite.
And is your proposal to just hope to be one of the next generation who still can eat their children? Or better yet, the children of those who didn't make it before the ladder was pulled up?
In any empirical sense this is absolutely false. The only instance of a significant negative instance of deflation was its contribution to the Great Depression in the early nineteen hundreds, and the effect of that was minor compared to the effects of extreme inflation (hyperinflation) that occurred in places like Weimar Germany and Zimbabwe. Deflation is inherently self-limiting because people have a baseline of goods they must consume for survival (housing, food etc.), and once that baseline is reached spending does not fall further; there's not a single instance in history of 99% deflation, while 99%, 999% and even 999999999% inflation has happened within even just the past few decades.
Oh boy, do I have news for you. It is in fact possible to run out of money, and in a deflating economy with no jobs you can't just go out and earn more. It puts peoples' collective backs against the wall -- at which point they decide to fight like cornered animals rather than die in a corner, and things get nasty.
Inflation crises are awful, but when you run out of money there are jobs and you can get more and this generally prevents them from turning into bloodbaths. This is why we collectively decided to err in this direction.
Weimar Germany is the perfect example. Did it suck? Yeah. Savings were incinerated, everyday activities became market speculation, the memes are all true -- but it happened under nearly full employment and once the root causes were addressed everything largely simmered down. This is in stark contrast to the deflationary shock of the Great Depression later that decade which propelled the Nazis into power and led directly to WWII.
99% deflation doesn't happen because people start killing each other long before then.
Millions unemployed, dependent on soup lines for survival, and their families living in makeshift shanty towns, is "minor"? Children were sold to provide subsistence. Generational wealth, from industries to family farms, were erased.
Why? Dollars are currently the most convenient. If that changes the world could easily switch to Euros, Yen, Yuan, etc.
Plus if everyone doesn't choose the same it's less convenient.
If China ever replaces Xi and the next generation takes a softer stance on a bunch of stuff it'll be a shoe in, but right now they're weirdly belligerent.
As to shifting politics: The EU is famously extremely hard to move.
The European Council decides the political direction and consists of the heads of state of the member countries; the European Commission is the executive cabinet and needs buy-in from the Council of the European Union and the European Parliament; the Council of the European Union is made up from ministers of the member states and each member state has a veto right on all foreign policy proposed by the European Commission; the European Parliament's members are directly elected through independent elections in the individual member states with proportional representation, and any policy proposed by the European Commission also needs a majority here; the Court of Justice of the European Union's General Court oversees this and is composed of two judges appointed by each member state for a renewable six-year period and reviewed by an independent committee.
In other words: nothing gets done fast, and nothing gets done without buy-in from a lot of people with very opposed political goals. Quite different from a country like, say, the United States, where the loser of the popular vote routinely becomes president, is handed God-Emperor levels of power, and is virtually impossible to unseat - leaving the foreign policies of a nuclear superpower to be decided by how a single person felt when he stepped out of his bed this morning.
That's the plan, but under Glorious Leader? Not clear which side he would attack (or possibly neither).
Will it? The Russians blew up an ammunition depot in Czechia without consequences. A cruise missile hit Poland and it was swept under the rug. Numerous acts of sabotage and Europe's done nothing. Now a drone attack in Germany and they're again, responding extremely weakly.
The only rational takeaway is that NATO is weak. If Russia attacks Latvia will the US go to war? Not s chance.
Most international trade is already done electronicaly, so there would not much need to physicaly move gold.
Goverments don't like gold standard because they can't print gold.
We give money to Israel, Ukraine, and everyone else - we print and print and print and a few people close to the action take some off the top.
That’s it. Maybe some rich kids get their university debt wiped clean (not community college though).
The US and even local governments within have become corrupted to the core - they are like ATMs and havens of various types for the emerging international wealth class.
That class may very well want to promote your idea since the best seat at the table right now is China.
Now everyone wants to be owed by the US à la China, it’s been great for international business. Mexico is the heir to that throne more than Europe - which doesn’t produce anything the world wants.